Brokerage Terms

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Here are common terms associated with stock brokers:

All or None: A type of order issued to a broker by a buyer or seller to fill the order completely or not at all. There are no partial transactions.

Ask: Also known as the “offer”, the price that the market maker guarantees to fill a buy order. A buy order placed at the market will usually be filled at the current asking (offer) price. The ask price is usually greater than the bid price.

Bid: The price at which the market maker guarantees to fill a sell order. A sell order placed at the market will usually be filled at the current bid price. The bid price is usually less than the ask price.

Block: A purchase or sale of a large number of shares or dollar value of bonds. Although the term is relative, 10,000 or more shares, or any quantity worth over $200,000 is generally considered a block.

Buy Stop: A buy order usually placed above the current price, ensuring that a security would have to trade at the set level before the buy order would be activated. at 35. By placing a buy stop order just above resistance, a trader can ensure that the security will break resistance before going long. On the other hand, traders looking to catch a bottom or intraday low might place a buy stop below the current price, but near support

Buying on Margin: A risky short-term strategy where a buyer borrows money from a broker to make an investment. The buyer believes the stock price will rise and is trying to maximize profits by investing more money in the stock.

Gap: Gaps form when opening price movements create a blank spot on the chart. This occurs when the high of the day is below the low of the previous day or when the low of the day is above the high of the previous day. Gaps are especially significant when accompanied by an increase in volume.

Limit Order: An order to buy or sell a security at a specific price. As opposed to a market order, limit orders might not be filled immediately if the market moves away from the specified price.

Market Order: An order to buy or sell a security at the prevailing market price. Sometimes referred to as “at the market”, these orders are usually filled immediately by the market maker. A sell order placed at the market will most likely be filled at the bid price and a buy order will be filled at the ask price

Offer: See Ask.

Spread: The difference between the bid and the ask. Generally speaking, more liquid (heavy volume) stocks usually have smaller bid/ask spreads. Less liquid stocks (light volume) usually have larger spreads.

Stop Loss Order: An instruction to the broker to buy or sell stock when it trades beyond a specified price. They serve to either protect your profits or limit your losses.

TICK: Each individual move from one stock trade to another. An UP-TICK means the price moved up on the last trade and a DOWN-TICK means it moved down.

Trailing Stop: A stop-loss level set above or below the current price that adjusts as the price fluctuates. For a long position, a trailing stop would be set below the current price and would rise as the price advances. Should the price decline and reach the trailing stop, then a stop-loss would be triggered and the position closed. As long as the price remains above the trailing stop, the position is held. Indicators such as the Parabolic SAR or moving averages can be used to set trailing stops.

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